The decision-making process and monetary policy deliberations

Date 13/06/2008

”The Riksbank is considered to be one of the most open central banks in the world. Part of this openness entails clearly describing the processes for making monetary policy decisions.” These comments were made by First Deputy Governor Irma Rosenberg in a speech where she described to the General Council of the Riksbank the monetary policy decision-making process and the deliberations the Executive Board will soon be making..

If an independent central bank is to be perceived as credible it must be possible for outsiders to understand its decisions and to assess its activities. In recent years the Riksbank has made several changes to its methods of producing monetary policy analyses. With effect from the beginning of 2007, for instance, we publish an interest rate path that describes the Executive Board’s views of how the interest rate will need to be adjusted in the future. As the interest rate path is a forecast, it may be necessary to change it when new information is received.

The Executive Board holds six monetary policy meetings a year. It is at these meetings that the Executive Board makes an overall assessment of the way the economy is developing. The next monetary policy meeting will be held on 2 July.

”We Executive Board members are now entering a very intense phase of the monetary policy decision-making process. The decision-making situation we have had during the spring has on the one hand concerned rising inflation and on the other hand signs of a slowdown in economic activity. In both respects developments in Sweden have been worse than we anticipated in the Monetary Policy Update published in April. The inflation figure for May was higher than expected, while growth during the first quarter was lower than expected. In principle, we are now facing the same type of problems of deliberation, that is, rising inflation and weaker economic activity. The way we Executive Board members finally decide to balance these factors and all other new information received prior to the meeting is something we will return to at our meeting on 2 July,” says Irma Rosenberg.